An oh-so-rare glimmer of sense and moderation amongst the SWF hysteria. Mohamed El-Erian, co-head of Pimco has said that fears about the funds’ investments in western companies is “overblown.”
He makes the point that the funds have been putting their money to work where we all most need it, into the sector most in need of stablising capital. So we’d be a lot worse off without them around.
We can only wonder about what would have happened in Wall Street if sovereign funds hadn’t poured billions of dollars in financial institutions in the past couple of months.
El-Erian adds that the funds should move to become more transparent concerning their investment and risk management, pointing out that Norway’s fund leads the way in putting out quarterly reports, holding press conferences and being “very clear about what type of investment is on their ‘negative’ list.” But hell. No one’s worried about Norway.
Elsewhere the political cage-rattling continues. Senator Evan Bayh in the WSJ argues that: “As Americans, we realize the folly of allowing our government to own our private companies, yet paradoxically, some appear far less alarmed by the prospect of another country’s government doing the same.”
They are alarmed. They won’t shut up about it. But Sen. Bayh wants us all to acknowledge that investments by foreign governments are inherently different from private investment.
But isn’t the problem really that in the nations that are proving worrisome to many US politicians, the line between public and private investment is in any case blurred? The nations where the distinction is more clearly cast aren’t the ones that anyone is fretting about.
It’s hard to see what kind of investment from China wouldn’t fall foul of this reasoning. And that is a problem, because China put $9.8bn directly to work in the US last year, up from a measly $36m in 2006. The 14 countries that outspent it included South Korea and Singapore and some predict that China will rise to within the top three in the next decade.
Middle Eastern nations are unsurprisingly also rising through the ranks, with the UAE spending $17.7bn last year in the US and Saudi Arabia $12.7bn. The Bayh comment takes issue with billionaire investor Prince Alwaleed bin Talal’s influence at Citigroup - namely that he helped engineer recent changes with “just” 5 per cent of the company, rather than the 10 per cent require to trigger a review on security grounds. A major shareholder rails against excessive costs and is perceived to have played some part in removing an underperforming chief executive. How anti-American.
From the WSJ:
Our need for capital investment and the benefits it brings must not deter action…..Reasonable regulations now will keep foreign investment flowing and help us avoid a potentially xenophobic reaction down the road.
Too late.
